Fed Moves to Assure Liquidity

The Federal Reserve in Washington issued a statement saying that the discount window is open and available to meet liquidity needs. The discount window is the lending facility of the Federal Reserve through which commercial banks borrow money.

The announcement, while pragmatically important, was also seen as a symbolic measure to ensure the public that the government will bankroll any money needs during the current crisis, and that the U.S. banking system will remain functional. It also gives confidence that any rescue or clean up efforts will have the necessary funding to be completed.

Following the stock market crash of 1987, the Fed took similar measures in an effort to assure that markets would not grind to a halt. The Fed also offered the discount window to commercial banks in late October and November of that year.

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